Since 2010, Vietnam has struggled to meet its rapidly growing peak demand, which has grown at approximately 10% per year. In the last three years, Vietnam Electricity (EVN) has been unable to add power generation capacity, upgrade the transmission and distribution network to the required levels and this state is likely to persist.

In 2019, amidst the heat wave, Vietnam had avoided a power shortage situation, despite reduced water levels in the country's hydropower reservoirs which reduced the available capacity from hydropower significantly. A shortage was averted due to three factors. First, EVN made an announcement seeking both residents and businesses to save power, second, EVN mobilized around 2 GW of costly diesel-fired generation and third, the large increase of 4.6 GW of solar capacity supported by the 30 June 2019 solar feed-in-tariff deadline.

Power shortages however are expected in the next few years, as 54 GW of the 62 GW of conventional generation projects planned are facing delays. These delays range from a couple of months to up to five years. It has become increasing difficult to obtain loans owing to the lower appetite of investors in coal-related assets and environmental pollution concerns. The delays in the gas-fired power plants are attributed to the slow development of gas infrastructure and upstream production.

By 2023, the power shortage situation should improve with 12 GW of conventional power generation capacity coming online from 2023 to 2025. Therefore, by 2023, even without the use of diesel-fired generation, the reserve margin will turn positive. Despite this, power shortages are still expected in the south. Gas-fired development in the south continues to be slow, while the north to south transmission line has faced delays in development. Securing adequate fuel will also be a challenge as both imported coal and LNG will be necessary to generate sufficient electricity.

Figure 1: Power shortages imminent as Vietnam's power demand expands rapidly.

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Joo Yeow Lee is a Senior Research Analyst covering the power, gas, coal, and renewables market analysis in Southeast Asian markets.

Posted 16 August 2019

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.